Under what conditions can an Afuri Ramen Dumpling franchisee terminate the franchise agreement?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
Accordingly, in the event that Franchisee terminates this Agreement other than in accordance with the terms of Section 6.2, or if Afuri terminates this Agreement pursuant to its terms, then Franchisee shall pay to Afuri within thirty (30) days of such termination as liquidated damages (and not as a penalty), an amount equal to the Royalty Fees you should have paid had this Agreement not been terminated, for the lesser of (1) 24 months, or (2) the number of months remaining on the term of this Agreement. Such payment will be calculated based on the average Royalty Fees you paid (or if unpaid, payable) during the 12 months immediately preceding the termination date (or shorter period if you will have operated for less than 12 months). The parties hereby acknowledge and agree that the actual damages that would be incurred by Afuri in the event of any breach or early termination of this Agreement by Franchisee would be difficult to calculate and that the liquidated damages provided for in this Agreement are fair and reasonable under the circumstances. The parties further acknowledge and agree that the liquidated damages specified in this Section are only intended to compensate Afuri for the early termination of this Agreement and Afuri's loss of royalty revenue resulting therefrom, but not for any other breach of this Agreement by Franchisee or any other damages incurred by Afuri, and all remedies applicable thereto remain available to Afuri.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
Based on the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, a franchisee's ability to terminate the agreement is tied to Section 6.2, although the specific conditions outlined in that section are not detailed in the provided excerpts. If a franchisee terminates the agreement outside of the terms specified in Section 6.2, or if Afuri Ramen Dumpling terminates the agreement due to the franchisee's default, the franchisee is obligated to pay liquidated damages.
The liquidated damages are calculated as the royalty fees the franchisee would have paid for either 24 months or the remaining term of the agreement, whichever is less. This calculation is based on the average royalty fees paid (or payable) during the 12 months preceding the termination date. If the franchise has operated for less than 12 months, the calculation uses the shorter period's average.
This clause serves as a financial protection for Afuri Ramen Dumpling in the event of early termination, compensating for the loss of anticipated royalty revenue. However, these liquidated damages are specifically intended to cover the loss of royalty revenue due to early termination and do not preclude Afuri Ramen Dumpling from pursuing other remedies for any other breaches of the agreement by the franchisee or any other damages incurred. A prospective franchisee should carefully review Section 6.2 of the franchise agreement to fully understand the conditions under which they can terminate the agreement without incurring these significant liquidated damages.